Gold: Technical overview shifts in the short-term

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Mixed data

Economic data out of the US showed ADP's (Automatic Data Processing) non-farm estimate to be a miss, with 177k growth, and slowing sizeably from its prior reading. Preliminary Q2 GDP (Gross Domestic Product) was at 2.1%, which was also lower than forecasts that had predicted a healthier 2.4%. The positives were found within the housing sector; week-on-week mortgage applications were up 2.3% after five consecutive weekly contractions, and month-on-month (m/m) pending home sales were up 0.9%, defying -0.6% expectations.

Yields retreat... again

As for Treasury yields, they finished the session lower again, albeit with limited losses this time. However, they were higher in real terms as breakeven inflation rates fell once more. Market pricing from Refinitiv for future Federal Reserve (Fed) action indicates a significant minority expecting a 25bp (basis point) rate hike in November. The odds are nearly 50-50, and the majority expect a rate cut next year in June.

In terms of former central bank commentary, the ex-president of the Boston Fed, Rosengren, expressed optimism. He stated that as long as they are 'gradually' reaching their 2% inflation target, 'there's no reason to hike further from here.

Pricing and labour data

And given the added focus on both price and the labour market at this stage, expect the attention to be mostly on PCE (Personal Consumption Expenditures) price index for the month of July released later today, where ongoing month-on-month growth is expected, and tomorrow with Non-Farm Payrolls for August to see if there's ongoing weakness in the labour market. Should that be the case, and market pricing for rate hikes could fall back.

Yields retracing off the highs a bit have given the non-yielding precious metal's price some breathing room, but should they increase again and gold prices could be in for another test.

Gold technical analysis, overview, strategies, and levels

A technical overview has shifted on the daily time frame from a previous 'bear average' to 'cautious consolidation,' following failures to maintain lower price levels, even if these were more influenced by fundamental considerations.

On the weekly time frame, the situation remains 'volatile,' where conformist breakouts have prevailed due to increased volatility. Bear in mind that these are technical levels subject to significant fundamental events. As such, these levels may struggle to hold upon the release of new data, especially if the results deviate significantly from expectations. This adds an element of caution for those wishing to go against the move

IG client* and CoT** sentiment for gold

As for sentiment, it’s still heavy to the buy side for retail traders but have pulled back from 69% yesterday to 67% as of this morning. So far, getting it right on the recent bounce given they held extreme long bias of 82% when it reached the lows and fresh buys enticed into closing out on the recovery. CoT speculators have also been more cautious, they too heavy to the buy side but pulling back to 65% as per last Friday’s report.

Gold chart with retail and institutional sentiment

_{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.}